There are indications that the subsidy burden on the 2022 budget may worsen as oil industry experts forecast higher landing costs for imported petrol in the days ahead.
The prices of imports have been on the rise, following the rise in crude oil prices which hit $90.3 per barrel early in the week.
The Nigerian National Petroleum Corporation, NNPC, had estimated the subsidy cost at N3.0 trillion in the next 18 months based on the current landing cost of about N360 per litre..
However, industry operators said they expect the cost to rise to N413.16, about 14.8 per cent increase, following a continued pressure on the crude oil price.
They, therefore, forecast the expected subsidy cost at about N3.5 trillion for the 18 months of subsidy.
International refiners usually transfer the price of crude oil to consumers in importing countries, including Nigeria.
Analysts who spoke with newsmen, yesterday, said a bulk of the oil revenue expected from the production of 1.8 million barrels per day, including about 400,000 barrels of condensate will go into funding petrol subsidy.
National Operations Controller, Independent Petroleum Marketers Association of Nigeria, IPMAN, Mike Osatuyi, said at the expected $100 per barrel and exchange rate of N575 to a US dollar, the landing cost would rise to N394 per litre, from less than N360 in recent times.
He said that when the N19.16 margins, including transport, retailers, bridging, marine and administration charges were added, the total cost rose to N413.16 per litre, leaving under-recovery or subsidy at N248.16 per litre as the government continues to fix the pump price at a maximum of N165 per litre.
Checks by Newsmen showed that the Midstream and Downstream Petroleum Regulatory Authority, NMDPRA, currently performing the roles of the defunct Petroleum Product Pricing Regulatory Agency, PPPRA, has not published data to guide operations in the domestic market.
In the international oil market, supply shortages remain a major concern which has continued to put upward pressure on prices.
Already, the Organisation of Petroleum Exporting Countries, OPEC, and its allies, popularly known as OPEC+, has suffered a production shortfall of 190,000 barrels per day, bpd, a development close market watchers, said would culminate in higher prices.
OPEC+ was expected to produce an additional 400,000 bpd last month, as part of measures targeted at meeting global demand as the global economy continues to gasp for breath after the Coronavirus pandemic lock-down, which crippled demand in many nations.
But data obtained by newsmen from OPEC indicated that OPEC+ produced about 210,000 bpd, showing a shortfall of 190,000 bpd,
According to OPEC, the largest under-producers, in terms of percentages, including Angola, Congo, Equatorial Guinea, and Nigeria, whose output is mainly affected by increased pipeline vandalism, oil theft and illegal refining in the Niger Delta.
Speaking at the Joint Technical Committee (Video Conference), yesterday, Mohammad Sanusi Barkindo, OPEC Secretary-General, who also attributed issues in the market to the Coronivarus pandemic, said: “We will continue to monitor developments in this regard and will be prepared to adapt to the ever-changing situation. One thing is clear though — this pandemic is far from over, and could foreseeably present new and unknown challenges in the months to come. So, we will simply have to be ready for the unexpected.”
Barkindo, who predicted a continued rise in oil demand, said: “Looking at the demand picture, we foresee world oil demand increasing by 5.7 mbpd in 2022 and by 4.2 mbpd, both unchanged from last month.
While the impact of the Omicron variant is projected to be mild and short-lived, uncertainties remain regarding the potential development of new variants and renewed mobility restrictions amid an otherwise steady global economic recovery.”
In terms of oil supply, he said: “For 2022, non-OPEC supply growth is forecast at 3.0 mb/d for an average of 66.7 mb/d, also unchanged from last month. We are also continuing to assess the potential near term impacts if some leading consuming countries carry through with their announced plans to release an estimated 70 mb from their strategic oil reserves.”
